View Update June 09View Update June 09
Managing market volatility
After the rollercoaster year of 2008, what's in store for fertiliser prices in 2009/10 GrowHow's Marketing Manager Ken Bowler spends much of his time studying the global trends and with the UK market representing just 1% of the total fertiliser market it is very much what happens in the wider world that drives UK prices.
Ken Bowler says "GrowHow UK is the only British fertiliser manufacturer, but that doesn't mean we have a monopoly. Far from it, despite just completing a £16 million investment, which increases production capacity by 120,000 tonnes, GrowHow only supplies 40% of the GB market. The remaining 60% comes in as imports. I should also point out that our future depends entirely on British farmers as none of our production is exported."
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NFU President, Peter Kendall, says: "Having a domestic fertiliser manufacturing base is important and valuable." |
2008 was unprecedented. A combination of huge global demand for fertiliser which outstripped supply and massive price hikes in energy resulted in high fertiliser prices. Energy, particularly natural gas is the main cost in Nitrogen production. However, the global recession and market response to higher prices led to a downturn in fertiliser demand and by spring prices had fallen.
It is understandable that farmers who bought early were aggrieved to find spring prices below autumn. However, this was an exceptional year. Looking back over the past nine years, early buyers have benefited in eight of the years with an average price discount during this period of £18/tonne.
But what of prospects for 2009? Ken continues: "Predicting prices with any certainty is difficult but the signs are that we should be in for less of a rollercoaster this season. It seems likely that Nitrogen prices will be lower and generally more stable but farmers should take steps to spread their risk by, for example, splitting orders and taking some fertiliser early, some mid and some late season," he suggests.
Prices for Phosphate and Potash look set to stay high. The costs of establishing a new Phosphate or Potash mine are even more prohibitive than for a new Nitrogen plant and the distribution of economically viable reserves is limited geographically. Exchange rates also have a huge impact on raw material costs. This time last year £1 = $2. Potash was $1,000 or £500/t. Today, Potash prices have eased to $750/t, or £469 at current exchange of $1.60/£ - however,a 25% reduction in $ cost results in only a 10% reduction in £ cost.
While the knee jerk reaction may be to delay ordering, this is not a realistic solution. The fertiliser industry has to deliver 3-4 million tonnes of product to thousands of British farms. It is totally impossible to operate on a 'just in time' basis. There is no infrastructure to allow wholesale storage, nor the transport capacity to operate in this way.
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Productivity is the name of the game
Speaking at a recent GrowHow conference leading Cranfield economist Sean Rickard said:
"It's not the price of fertilisers but the price per unit of output that matters. The trick is to maintain output and use less fertiliser per hectare or use the same amount of fertiliser and produce more - that's a productivity gain and it comes from the implementation of successful research and development and from better fertiliser management."
Review of optimum N rates in cereals
Higher grain prices and lower Nitrogen prices for
spring 2010 will increase the optimum Nitrogen rates for cereals and oilseed rape. Therefore, farmers need to ensure this season's order size takes account of the higher rates now justified. Crops need Sulphur for healthy growth. This is because Sulphur is used in conjunction with Nitrogen to make amino acids, the building blocks of protein.
The term Break Even Ratio (BER) is the ratio of N price per kg (p/kg) of nutrient to grain p/kg (one tonne of Nitram® contains 345 kg nutrient N). Current RB209 recommendations are based on a BER of 3:1. N bought in 2008 and cereal prices in spring 09, resulted in the
BER being at an all time high of over 8:1. The change in BER impacted on optimum rates reducing recommendations by more than 50 kg N/ha.If Sulphur availability falls below 15 kg/ha, yields of winter wheat have been shown to suffer dramatically. Rothamsted Research and ADAS studies clearly show the importance of Sulphur in allowing the crop to make full use of the Nitrogen applied.
On Sulphur responsive sites, yield potential is immediately reduced when Sulphur is not applied. These yield losses are most dramatic in oilseed rape with potential losses of over 40% - on lighter soils this may be as high as 80%. In winter wheat yield losses can be as high as 15%.
The reductions in N price at the start of this buying season and firmer cereal prices reduce the current BER to 4:1 and returns N rate recommendations to those used in recent years.
The GrowHow N-Min® & N-Calc service produces recommendations for cereal and oilseed rape crops and calculates adjustments to account for changes in BER.
Why crops need Sulphur - its effect on yields
Crops need Sulphur for healthy growth. This is because Sulphur is used in conjunction with Nitrogen to make amino acids, the building blocks of protein.
If Sulphur availability falls below 15 kg/ha, yields of winter wheat have been shown to suffer dramatically. Rothamsted Research and ADAS studies clearly show the importance of Sulphur in allowing the crop to make full use of the Nitrogen applied.
On Sulphur responsive sites, yield potential is immediately reduced when Sulphur is not applied. These yield losses are most dramatic in oilseed rape with potential losses of over
40% - on lighter soils this may be as high as 80%. In winter wheat yield losses can be as
high as 15%.
